Sotheby's International Realty Affiliates LLC, the real estate unit of the auction house, plans to start business in China's luxury property market by the first half of next year to tap the country's growing wealth.

The company will focus on the first-tier cities such as Beijing and Shanghai, Chief Executive Officer Michael Good of the New Jersey-based firm said. Sotheby's real estate unit has affiliates in 45 countries and regions, including Japan, Hong Kong, Taiwan, Thailand and Vietnam in Asia.

"We've had a lot of global growth, but we've been very careful with China, because China is such an important emerging economy," Good said in an interview in Shanghai yesterday. "We think it's very, very important to be measured in our approach and make sure that we better understand the real estate players and the nature of the business in this country."

Sotheby's joins competitor Christie's International to access growing wealth in China as buyers search for overseas properties amid purchasing and financing curbs imposed by governments in Hong Kong and Beijing to cool off the real estate market. The number of millionaire households in China climbed 31 percent to 1.11 million in 2010, ranking the country third behind the US and Japan, according to a Boston Consulting Group survey last year.

The move will allow Sotheby's to tap its network of some of the world's richest property buyers to invest in China, while connecting the country's surging riches with the world's luxury real estate assets, Good said.

High-end properties

High-end properties account for approximately 7 percent of China's overall residential market, according to Jones Lang LaSalle Inc., which defines the category as above 40,000 yuan ($6,285) per square meter. Just 1 percent of the residential market in Beijing and Shanghai is priced above 64,000 yuan per square meter, according to London-based real-estate broker Savills Plc.

Sotheby's seeks to work with brokerages, project sales or even developers, because the upper-tier resale brokerage operation in China is not as mature as in some western countries, Good said. He declined to elaborate how much returns the company expects to generate from China.

Christie's International, the London-based auction house, set up a real estate franchise earlier this year in Hong Kong, its first in Asia, to access buyers in the world's most expensive place to own a home.

Sotheby's International Realty's operations are owned and operated separately from the Sotheby's auction house. The real estate brand has a 100-year licensing agreement with the auction house, Good said.

Chinese authorities' two-year efforts to crack down on "speculative capital" included the introduction of a property tax in Shanghai and Chongqing, higher down-payment requirements and limiting the number of home purchases by each family in metropolitan areas such as Shanghai and Beijing.

"There are cycles in all countries; we can't change that," Good said. "In the US, we've been through a very significantly challenging time in the real estate industry, and yet our brand has continued to grow during this tough time."